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Fed toughens banking rules
WASHINGTON — The Federal Reserve will require the largest foreign banks operating in the U.S. to hold higher levels of capital reserves to protect against potential loan losses.
The stricter regulations the Fed adopted Tuesday are intended to prevent the types of threats that contributed to the 2008 financial crisis. The requirements are similar to those already adopted for big U.S. banks.
Fed Chair Janet Yellen, presiding at her first public meeting of the central bank’s board, said the changes will “help address the sources of vulnerability” exposed by the crisis. The rules were adopted 5-0.
Foreign banks objected, arguing that the rules would raise the cost of doing business in the U.S. and reduce the loans they could provide.
The rules will require overseas banks with at least $50 billion in assets to set up U.S. holding companies subject to U.S. rules.
The Fed was ordered to toughen its regulations in 2010.